Valuing a Carpentry Business
The carpentry industry is directly related to and affected by the construction industry. As this is a service industry, a carpentry business relies on the demand from consumers. Over the last five years, nonresidential construction has been on a downward trend. The Covid-19 pandemic plummeted the industry’s demand by 11% in 2020. Despite this aggressive decline, the carpentry industry is experiencing an increase in revenue. This is due to increased housing demand. Whether you plan on selling or buying a carpentry business, it is important to learn about the fair market value of a carpentry business.
There are several factors that impact the value of a carpentry business. As a business appraiser, Peak Business Valuation works with dozens of individuals buying or selling a carpentry business. The best thing to do when buying or selling is to obtain a business valuation. As part of that process, our valuation team will discuss some of the key factors they use in valuing a carpentry business. Keep in mind the factors below are only a guide. For specific information on valuing your carpentry business, schedule a free consultation with Peak Business Valuation, business appraiser.
Market Multiples for a Carpentry Business
- REV Multiple Average: 0.32x – 0.61x
- SDE Multiple Average: 1.73x – 2.63x
- EBITDA Multiple Average: 2.37x -4.31x
**Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
Developing an understanding of what your carpentry business is worth will help the overall success of your business. You can take the steps necessary to increase the value of your carpentry business. This is helpful when you are expanding, acquiring a new business, or maximizing the value of your carpentry business before selling. Here are some ideas to increase your carpentry business value. If you are in the market for a more extensive valuation, schedule a free consultation with Peak Business Valuation, business appraiser.
Valuing a Carpentry Business
Below are factors a valuation expert will look at when valuing a carpentry business. For questions, schedule a consultation with Peak Business Valuation, business appraiser. See Value Drivers for a Carpentry Business, How to Value a Carpentry Business, as well as Valuation Multiples for a Carpentry Business for more information.
Lumber Prices
Certain businesses are closely related to a commodity such as lumber, coal, oil, or steel. Because of this, the price of the commodity affects the financial performance of the company. Our professionals at Peak Business Valuation will often look at historical price averages to better understand a company’s operations for a normal year. This is often a better indicator of value.
Key Success Factors
Peak Business Valuation, business appraiser, values carpentry businesses on a regular basis. Below are a few success factors that will help distinguish your carpentry business. These will also increase the value of your carpentry business.
Stock on Hand
With the pandemic affecting the supply and demand chain, resources are limited. A carpentry business that keeps supplies on hand will reap the benefits. Meeting customer demands at all times will improve rapport and create customer satisfaction. Waiting on supplies when you already have contracts and deadlines will hurt the business. Taking the initiative to have supplies on hand will enhance your business model and increase customer satisfaction. Creating a reputable and reliable business is important because it creates positive bonds with contractors and consumers who supply workload.
Skilled Team
Having an expert team is of key importance. The average number of employees in a carpentry business is 1.7. With this number being so low, it is essential for the owner to bring on skilled and experienced workers. Another option is to train current employees to meet carpentry standards. A skilled team can take on a heavier workload which increases revenues.
Recurring Revenue
Last, a valuation expert will look at the amount of recurring revenue the carpentry business incurs. The expenses that come along with advertising a business are high. To avoid those costs, consider creating service contracts with contractors to supply a consistent workload. Recurring revenue is valued higher than one-time jobs because it creates a steady flow of income. Recurring revenue also means quality relationships with customers and contractors. This will help your business incur additional work and contracts.
In a valuation report, recurring revenue will increase the overall worth of your business. For more information on how to understand or increase the value of your carpentry business, schedule a free consultation.
Summary
There are several things to consider when valuing a carpentry business. It is important to understand the value of a carpentry business whether you want to buy, sell, or grow a carpentry business. Receiving a business valuation will help you understand the fair market value. It will also uncover opportunities to maximize the value of a carpentry business.
Peak Business Valuation, business appraiser, values carpentry businesses across the nation. We would love to answer your questions and help you understand the value of a carpentry business. You can reach out by scheduling your free consultation below.
